Part 4 - 2

We Have Correctly Described the Effects of Price Ceilings AND Price Floors Using Our Business

• Price Ceilings
  • If a price ceiling is applied to the music lessons or instrument markets, then we would have either or shortage of instruments that we could sell, or a shortage in the amount of music lessons (not enough time in the day to meet the demands) that we could offer due to the increased demand that came from a lower price. Since we would be experiencing a shortage and an inability to meet the demands of paying customers, our profits would decrease.
• Price Floors
  • If a price floor was applied to either the music lessons or instrument markets, then we would have a surplus of instruments that need to be sold, or a surplus of music lessons (not all time slots being filled). With such a surplus, our business would lose money due to the fact that we are selling less than we should be able to in a regular business day.

We Have Used the Correct Language Associated With Interdependence

• Our business is interdependent with the government and its decisions. If the government decides to implement either a price floor or a price ceiling, consequences - both intended and unintended - are sure to follow. If the government creates a price ceiling and lowers the equilibrium price, then there will be a shortage, and we will lose profit. Likewise, if the government creates a price floor and raises the equilibrium price, we will lose profits due to the inability to meet consumers' demands. Either way, the decisions of our government have intended and unintended consequences.

We Have Provided One Other Example Of How Interdependence Affects Our Business

• Our business is interdependent with musicians. Musicians need instruments to play, and instructors to help them play as well as they can. We, in turn, need players and musicians to purchase our instruments, to advertise our business among the musical community, and to keep participating in music lesson so that we can keep gaining profit.